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Johnson & Johnson Wins Hep C Battle, but War Doesn't Look Good

Johnson & Johnson beats Gilead Sciences to deliver the first next-generation hepatitis C drug approved in the U.S., but a battle with Vertex Pharmaceuticals' and Merck's first-generation drugs will be short lived with Gilead and AbbVie developing all-oral cocktails.

Johnson & Johnson(NYSE:JNJ) has won the race to bring the first next-generation hepatitis C drug to the U.S. market. The Food and Drug Administration approved Olysio, formally known as simeprevir, on Friday evening, while Gilead Sciences' (NASDAQ:GILD) sofosubivir is still pending with the federal agency.

Unfortunately, the lead -- however long it might be -- isn't worth all that much.

Better...Olysio is a protease inhibitor like Vertex Pharmaceuticals' (NASDAQ:VRTX) Incivek and Merck's (NYSE:MRK) Victrelis, but it appears to be more efficient at clearing the hepatitis C virus quickly.

Olysio and Incivek are taken with pegylated interferon and ribavirin for 12 weeks; if the patient is then virus-free, the pegylated interferon and ribavirin only have to be taken for 12 additional weeks. If the virus isn't cleared quickly, the patient has to take the pegylated interferon and ribavirin for 38 more weeks. Considering pegylated interferon causes flu-like symptoms when taken, it's a big deal to cut in half the time patients have to take the drug.

When the data from the phase 3 trials in treatment-naïve patients were combined, Olysio allowed 88% of patients to take the shorter treatment. Only 58% of patients in the pivotal trial of treatment-naïve patients taking Vertex's Incivek were eligible for the shorter treatment. Merck's shortened treatment for Victrelis requires the drug be taken with pegylated interferon and ribavirin for 28 weeks, which is one of the reasons Incivek has sold so much better than Victrelis.

... But not bestWhile Olysio appears to be more effective, patients still have to inject themselves with pegylated interferon and deal with the side effects. Olysio won't be used as a treatment in combination with pegylated interferon for all that long because new all-oral combinations are coming.

Gilead and AbbVie(NYSE:ABBV) are both developing all-oral combinations that not only don't require pegylated interferon, but also appear to have better cure rates. AbbVie's combination, for instance, just posted a 95% cure rate in patients infected with genotype 1a hepatitis C. Olysio only cured 75% of patients with that type of infection.

Olysio isn't part of Gilead's or AbbVie's combinations, but Johnson & Johnson has partnered with other drugmakers -- namely Idenix Pharmaceuticals and Bristol-Myers Squibb -- to test all-oral combinations. Those treatments are considerably behind Gilead and AbbVie.

Ironically, Johnson & Johnson could be the first to market for the next-generation hepatitis C drugs, but end up trailing in the end.

Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences, Johnson & Johnson, and Vertex Pharmaceuticals. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.